Sunday, January 29, 2012

"Unions Hate Private Equity, but They Love Its Profits"

Be sure to follow the 'Update' link. The Economist's numbers comport more with what I've seen over the last decade.
There's a reason Carlyle is doing it's IPO in 2012 rather than in 2002.
From The Atlantic:

The Wall Street Journal reports that many of the same public-employee unions that have attacked Mitt

Romney for his private equity career are increasingly pouring their own pension money into ... private equity. Awkward.

According to the Journal, large public pensions now have about $220 billion, or 11% or their total assets, invested with firms like Bain Capital, the private equity giant where Romney made his fortune. That's $50 billion more than a year ago. The chart below tracks the long term trend.
Public employee unions have been pretty unsparing with Romney over his tenure at Bain, which they've accused of firing workers to wring more profits from the companies it's targeted in leveraged buyouts. The Service Employees International Union, for instance, has gone after him for having "a long and troubling track record of putting profits above workers." Meanwhile, the WSJ writes that the union's members have retirement savings in "numerous state and county pension plans" that have poured money into private equity. One SEIU member is a trustee on the Ohio Public Employees Retirement System, which has billions in private equity investments.

It would be easy to play gotcha here. But that's less interesting than looking at what all this says about private equity's rising profile in the contemporary world of finance. Public pension funds are turning to these investments as they strain to hit their yearly return target of 8%. According to the WSJ, that's partly because during the last decade, private equity returns were more than twice as high as the S&P 500 stock index and Dow Jones Industrial Average....MORE